SINGAPORE (Reuters) - Environmentalists criticised the United Nations on Tuesday after it ruled that a large Indian coal-fired power project is eligible to earn carbon credits worth $165 million at current prices.

Several green organisations said the U.N. rules, or methodology, applied to the 4,000 MW supercritical plant owned by Reliance Power were flawed and that the project was viable without the sweeteners of tradeable carbon credits called certified emissions reductions (CERs).

The power station, Andhra Pradesh’s Krishnapatnam, is the second Reliance Power project to be formally registered by the United Nations under its Clean Development Mechanism.

In total, five high-efficiency coal power plants have been registered under the CDM -- four in India and one in China -- meaning they are all eligible to earn CERs that they can sell.

The CDM is meant to reward developers of clean-energy projects in poorer nations by giving them CERs as a way to make the projects viable.

"To say that this project required CDM revenues to go forward is patently absurd," said Anja Kollmuss of CDM Watch, a green group that monitors the CDM market.

"Not only is the project required by the Indian government to use supercritical technology, but they already secured all the necessary financing, bought the land, began construction, and ordered all of the critical components before they knew if they could receive CDM funds," she said in a Washington-datelined statement.

The executive panel that governs the CDM has been under pressure to suspend the methodology under which firms can apply for U.N. offsets on the basis of cutting greenhouse gas emissions through more efficient power generation technology.

UNDER PRESSURE

Supercritical and ultra-supercritical power plants use more efficient boilers that cut coal consumption per megawatt/hour. The Indian government has rolled out a programme that supports the building of 4,000 MW supercritical plants to try to meet booming power demand. Reliance, Tata Power and NTPC are investors.

Last week, the methodology panel, which advises the CDM executive board, seemed to back the concerns by stating that the methodology, ACM0013, "may lead to significant overestimation of emission reductions," Point Carbon News, a Thomson Reuters subsidiary, reported on Monday.

The panel said the methodology should be put on hold with immediate effect.

"This project never should have been registered. It is plainly not additional," said Steven Herz, senior attorney with the Sierra Club's International Climate Program, said in the joint statement with CDM Watch.

He was referring to a central CDM rule that developers must prove that a project or technology type would not be viable without CER revenue.

Reliance Power declined to comment. But a person familiar with the matter said that "the entire process as laid down by the U.N. was followed."

The United Nations secretariat that oversees the CDM dismissed the concerns.

"The project was registered and there is no story there. The project would have gone through the regular vetting process," David Abbass, public information officer for the CDM office told Reuters.

The five registered power projects involve two from Reliance Power totalling 8,000 MW, two projects totalling 2,640 MW from Adani Power and a 2,000 MW ultra-supercritical plant by Shenergy in China.

According to U.N. data, the five projects are eligible to receive a total of 68.2 million CERs over a 10-year crediting period. That is worth 661 million euros ($919 million) based on current prices of CERs traded on the European Climate Exchange of 9.70 euros.

Reliance's Krishnapatnam plant will receive 12.3 million CERs and the firm's other 4,000 MW plant, Sasan Power in Madhya Pradesh, will receive 22.5 million.

Total carbon dioxide emissions from the five projects, based on data from project design documents, over the 10-year crediting period is 673 million tonnes. That compares with the total annual greenhouse gas emissions of Australia at less than 600 million tonnes.

The European Union's emissions trading scheme is the main buyer of CERs and the EU has already banned the use of CERs in its scheme from some types of projects from 2013.

"As of now no other credits are banned, however, there is a risk that EU may ban the use of other kinds of credits on sustainability aspects," said Ashutosh Pandey, CEO, carbon advisory business, for project developer Emergent Ventures India.

(Additional reporting by Prashant Mehra in Mumbai, Nina Chestney in London, Ratnajyoti Dutta in New Delhi and Stian Reklev of Point Carbon News in Beijing)

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